Supporting educational equality with student loans in Hungary

In a country where youth unemployment stands at 26% for the general population yet only 5% for those with a Bachelor’s degree under their belt, declining access to higher education has the potential to impact upon social and economic prospects. The EIB has been successfully supporting student loans for a decade, thereby enabling students with a thirst for knowledge to enrol on university courses.

Student loans hold the key to equal educational opportunities. Diákhitel Központ Zrt. (Diákhitel), Hungary’s student loan company, has been helping to enable students to pay their expenses and continue with higher education studies since 2001. The loan scheme soon took off and in 2005 Diákhitel called on the EIB to help ensure that their financing capacities could meet student demand. Nine years and four loan agreements later, with financing totalling almost EUR 500m, the Bank has been behind almost half of all student loan disbursements in Hungary.

A partnership for stability

When the Bank and Diákhitel began their relationship, the shared aim was to provide loans with competitive pricing, with the not-for-profit company passing all the financial advantages of EIB funding on to students. Whilst this still holds true, neither side could have guessed at the time how the partnership would develop over the course of the coming years.

At the height of the crisis Diákhitel and the Bank worked together to ensure that students would not be unduly affected by the credit crunch. “During the most uncertain period of the financial crisis, in 2008- 2009, the EIB stood as a stable and reliable financing partner. Furthermore, the Bank eased the conditions of the availability of its loans for Diákhitel, which made the financing of the loan scheme much more secure in the hardest times,” says Csaba Bugár, CEO of Diákhitel Központ Zrt.

Benefiting both students and universities

From 2011-2012, higher education enrolment in Hungary decreased by 25% as a result of the public squeeze on funding for universities. The government decided to extend the student loan scheme by introducing a new type of loan provided by Diákhitel to help higher education institutions maintain enrolment numbers and guarantee their own financial stability.

The fluency and flexibility built into the relationship with Diákhitel was again brought to the fore with the introduction of the new student loan product, which the EIB supported with a loan in 2013. In the past Diákhitel’s free-use loans were also available to cover living expenses, but the additional new loan can only be used to cover training costs. By assigning the loan to the benefit of the higher education facility, the student in effect enhances the university’s financial efficiency. The mutual benefit for student and university alike underscores the EIB’s support for youth skills and educational improvements as a driver of European growth and jobs.

Its relationship with the EIB has also resulted in non-financial achievements for Diákhitel. To meet EIB reporting requirements, the student loan company launched a new and efficient management information system in 2006. Furthermore, Diákhitel carries out social-economic surveys and studies which have enabled the EIB and Diákhitel’s decision-makers to successfully monitor and fine-tune the Hungarian loan scheme.

A model for Europe

From humble beginnings, Diákhitel has established itself as a model for European student loan schemes. It is clear that the company has the sustained development of both Hungarian students and universities as its foremost aim. The EIB looks forward to helping Diákhitel drive home this success.